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Food inflation pulses up

The Challenge

Food inflation, which inched up to 6.08% in November, is the main story in Monday’s Consumer Price Index (CPI) data. Lentils were the main culprits for the rise. Inflation in pulses and pulses products rose to a high of 46.08% since the new series has been released.

Inflation in the prices of pulses has been so high in the past couple of months that this category—which has less than 3% weight in the overall CPI—has contributed more to inflation than the miscellaneous category that has a 28.32% weight, points out Gaurav Kapur, economist at the Royal Bank of Scotland.

Although the government has taken some measures to prevent hoarding and imported some pulses, there is still a demand-supply gap in the commodity, say economists. Unlike say wheat or rice, pulses don’t have ample buffer stock.

While the kharif pulses crop sowing was close to normal and should provide some relief, prices may not move much because of unseasonal rains affecting rabi sowing. Thus, the seasonal dip in prices that usually happens in December-January may not happen. It may even rub off on other protein categories.

The lower-than-usual seasonal dip is not restricted to pulses; even vegetable prices haven’t softened as much as is usually the case. Indeed, vegetable price inflation has swung from minus 8% in July to 4% in November. Of course, this was partly anticipated.

“Although the seasonal moderation in prices of vegetables and fruits is expected to provide some respite, the El Niño induced shortening of winter may limit this effect,” the central bank remarked in its last monetary policy statement. The base effect too had a role to play in this, with a huge downswing the same time last year.

As the base effect wears off in some categories and unseasonal rains affect winter sowing, the prognosis for food inflation doesn’t look good.

 

Challenge Opened: 05:42 AM, Tuesday 15 December 2015
Challenge Closes: 06:30 AM, Wednesday 16 December 2015
Time to go: Closed

 

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The context

Challenge Opened: 05:42 AM, Tuesday 15 December 2015
Challenge Closes: 06:30 AM, Wednesday 16 December 2015
Time to go: Closed

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